...and hopefully it will be a non-event for lenders since we've had so much advance notice. Senator Elizabeth Warren, in fact, believes that the new rules will help buyers. But lenders remain unconvinced, and time will tell.

The MBA is certainly keeping an eye on it, as is the National Association of Realtors. It is hoped that we'll see "homebuyers access safer mortgages that meet strong underwriting standards." Or so spoke Consumer Financial Protection Bureau Director Richard Cordray at an event held by NAR. (Not NRA!) "The Ability-to-Repay rule is straightforward. It puts behind us once and for all the kind of irresponsible lending that disrupted the housing market and so badly damaged our economy, and it provides strong new consumer protections while preserving needed access to mortgage credit," he said of the rule and its Qualified Mortgage standard. To echo that, NAR President-elect Chris Polychron observed, "These regulations will go a long way to protecting consumers from receiving loans that may be inappropriate for them and gives them additional legal protections. NAR supports these changes and has provided input throughout the rulemaking process."

Not so fast, however. Cordray acknowledged concerns that the new rules could further constrain credit in an already tight lending environment. [Duh.] "Importantly, our rule also takes careful account of these access-to-credit issues," he said. "Those lenders that have long upheld strong underwriting standards have little to fear from the Ability-to-Repay rule. Qualified mortgages cover the vast majority of loans made in today's market, but they are by no means all of the mortgage market." Cordray explained the basic criteria for Qualified Mortgages, which cannot be made to a borrower with a debt-to-income ratio greater than 43 percent. "They also cannot have certain risky features, such as paying interest only or even negatively amortizing so that each month the consumer owes more than they did before and loans must have relatively reasonable points and fees," he said. (Remember that F&F have not, at this time, modified DU & LP regarding DTIs.)

The rule includes a 3 percent cap on points and fees, which NAR believes unfairly discriminates against affiliated lenders who have to count many more items toward fees and points than large retail financial institution, such as title insurance charges and escrow for homeowner's insurance. "The problem is that under this rule, affiliated and non-affiliated firms are treated differently," said Polychron. "It's NAR's view that this would be a disadvantage to many real estate affiliated lenders and reduce the choices available to consumers of where they can get a mortgage, and because the unaffiliated lender must still use a title company, the consumer pays the same amount either way."

At the event, Lawrence Yun, NAR's chief economist, explained the future of homeownership depends on greater access to credit. "Over the past eight years, homeownership in the U.S. has decreased while many in the growing population have turned to renting instead of buying a home. We need to ensure that good, creditworthy renters can someday have the appropriate access to credit so they can build equity through homeownership." But Barry Zigas, the director of housing policy for the Consumer Federation of America, applauded the CFPB for listening to stakeholders across the country to create a meaningful rule to protect consumers. "Consumers are finally going to be in an environment where their ability to repay a loan will be the fundamental determining factor about whether they'll get a loan or not. This is a terrific week for Americans," he said.

Let's see what those clever lenders, investors, and vendors are up to - nothing ever remains the same, right? Source: Rob Chrisman newsletter

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